Nomura maintains ‘buy’ rating on Torrent Pharma amidst Cipla acquisition buzz

Recent reports suggest that Torrent Pharma, a prominent player in the pharmaceutical sector, is considering the acquisition of Cipla, another major pharmaceutical giant.

This has grabbed the attention of brokerages, who to get ahead of the curve, have written on Torrent Pharma, Cipla and the possible deal.

Nomura has expressed its optimism about Torrent Pharma's potential acquisition of Cipla. It has a ‘buy’ call and has even raised its target price for Torrent Pharma to Rs 2,199. Nomura believes that such a merger makes strategic sense, provided it is executed effectively. One of the key benefits of this acquisition would be Torrent Pharma's diversification into international markets, particularly in the United States, where it has underinvested.

Another notable aspect that Nomura sees is costs and synergies in R&D and generics front-end, which could exceed around Rs 1,000 crore.

According to IIFL, this merger would be a better strategic fit for Torrent Pharma than for Dr Reddys, another major player in the pharmaceutical sector. If the deal were to go through, the merged entity of Torrent-Cipla would rank among the top three players in 10 key therapy areas within the domestic market.

Torrent's scale in the US market could increase 6x — it will get access to Cipla’s rich pipeline of inhalation products as well as complex injectables. IIFL have a ‘buy’ call on Torrent with a target price of Rs 2,400, on Cipla with a target price of Rs 1,150 and 'reduce' on Dr Reddys with a target price of Rs 3,900.

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